GAO suggests Postal Service did not pay too much into retirement program

A top government watchdog has cast doubt on assertions that the U.S. Postal Service paid tens of billions of dollars too much into a federal retirement program.

The Government Accountability Office’s report, which is expected to be released Thursday, found that the amount the agency pumps into the Civil Service Retirement System is more of a policy choice than anything else.

That finding is in stark contrast both to the Postal Service’s own claims that it has overpaid into CSRS – and to studies conducted by other oversight bodies, like the agency’s own inspector general, that found that USPS could get as much as $75 billion back after pouring too much money into CSRS.

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“Some have referred to ‘overpayments’ that USPS has made to the CSRS fund,” says a draft of the report, which was obtained by The Hill. “The term ‘overpayment’ can imply an error of some type – e.g., mathematical, actuarial, or accounting. We have not found evidence of error of these types.”

GAO, the investigative arm of Congress, also says that taxpayers could be on the hook if policymakers allow USPS a refund from those purported overpayments. In all, the report’s findings largely dovetailed with a study on the issue conducted by the Office of Personnel Management’s inspector general.

The new report could prove influential as lawmakers push to drastically remodel USPS, which just finished up a second consecutive fiscal year with a steep financial loss.

With mail traffic declining significantly in recent years, in part due to technological advancements, the Postal Service also sped toward its $15 billion borrowing authority in recent months during fiscal 2011. USPS was also supposed to prepay $5.5 billion for retiree health care at the end of last month, but Congress delayed the due date until mid-November.

Some of the congressional proposals to overhaul USPS relied on CSRS funding to help the agency shore up its finances. And Sen. Tom Carper (D-Del.), the sponsor of one of those measures, signaled in a statement given to The Hill that he was rethinking his approach to the issue, at least for the time being.

“The disagreement among the experts over the Civil Service Retirement System overpayment is significant enough that I believe it would be more prudent to set aside this question for the time being in order to focus on the areas of postal reform where we have more consensus,” said Carper, who chairs a Homeland Security panel that oversees USPS and was one of the lawmakers to request the GAO study.

Carper said one of those possible areas of agreement was a smaller overpayment, of $6.9 billion, into the Federal Employees Retirement System. The GAO report affirmed that overpayment, which has also gained wider acceptance among those studying the Postal Service’s findings.

The dispute over whether USPS overpaid into CSRS dates back four decades, to when the Postal Service was established as an independent part of the executive branch that was expected to use mail revenues to pay for its responsibilities.

Subsequent legislation altered how USPS paid into federal retirement programs, part of the reason the USPS inspector general, the Postal Regulatory Commission and two private accounting firms found that the agency had overpaid.

But GAO found that, while the inspector general and PRC had used legitimate actuarial methods to reach their conclusion, nothing in the last four decades had fundamentally changed the Postal Service’s obligations to CSRS.

The study also declared that USPS had already accounted for CSRS pension costs in its postal rates over the years, and that transferring responsibility for retirement payments to the federal government would lead to a large unfunded pension liability down the line.

“Thus, any transfer of USPS pension obligations to the federal government would mean that USPS would receive payment for these costs twice, once by ratepayers and once by taxpayers,” the report said.

The GAO analysis also comes as a House Republican plan for revamping the Postal Service is scheduled to be marked up in the Oversight and Government Reform Committee.

Reps. Darrell Issa (R-Calif.), the panel’s chairman, and Dennis Ross (R-Fla.) – key sponsors of the House bill – have long been skeptics that the agency had overpaid into CSRS, and have called the overpayment to FERS just a projected surplus.

“Straightening out the facts about this argument the Postal Service has pushed, as its financial situation has deteriorated, should help Congress focus its energy on real solutions to cut costs and reform the Postal Service,” Issa told The Hill in a statement.

House Democrats and Sen. Susan Collins (R-Maine) also have their own postal reform bills, as officials also try to figure out knotty issues such as whether to allow USPS to scrap Saturday delivery and whether to make other delivery changes.